SNC SNC Lavalin Group Inc

Q4 2022 Financial Highlights
(All results reflect comparisons to prior-year period of Q4 2021, except otherwise indicated)

• SNCL Services revenue increased 1.0% to $1.7 billion, or 1.1% on an organic revenue growth⁽¹⁾⁽⁵⁾ basis, despite a $93.0 million positive impact of a favorable arbitration outcome in Q4 2021 in the Engineering Services segment
• SNCL Services Segment Adjusted EBIT of $155.9 million, representing a 9.0% margin
• LSTK Projects Segment Adjusted EBIT of negative $150.2 million, following what management expects is the last material cost reforecast, as the two Ontario projects have reached the major milestone of being largely physically complete
• Net loss from continuing operations attributable to SNC-Lavalin shareholders totaled $54.4 million, or $0.31 per diluted share, compared to a net loss of $15.3 million, or $0.09 per diluted share in Q4 2021
• Net cash generated from operating activities of $176.0 million

Full Year 2022 Financial Highlights
(All results reflect comparisons to full year 2021, except otherwise indicated)

• Delivered on the pillars of the Company's "Pivoting to Growth" strategy
• SNCL Services revenue increased 4.9% to $6.6 billion, or 6.8% on an organic revenue growth⁽¹⁾⁽⁵⁾ basis, in line with the high-end of the latest Company outlook range
• SNCL Services Segment Adjusted EBIT of $581.0 million, representing an 8.7% margin, in line with the latest Company outlook range
• SNCL Services backlog increased 4.9% to $11.8 billion as at December 31, 2022
• LSTK Projects Segment Adjusted EBIT of negative $261.3 million. Now that the two Ontario projects are largely physically complete, focus will be on handing over the projects to the clients and pursuing the Company's claims
• Net income from continuing operations attributable to SNC-Lavalin shareholders of $16.6 million, or $0.09 per diluted share, compared to $100.2 million, or $0.57 per diluted share in 2021
• Net cash used for operating activities of $245.4 million, better than the latest Company outlook provided in the Q3 2022 earnings press release

2023 Outlook

• SNCL Services organic revenue growth⁽¹⁾⁽⁵⁾ expected to be between 5% and 7%, compared to 2022, with an SNCL Services Segment Adjusted EBIT to segment revenue ratio between 8% and 10%
• Net cash from operating activities is expected to be negative in the first half of 2023, as cash inflows from SNCL Services and Capital are expected to be more than offset by cash outflows from LSTK Projects, while net cash from operating activities is expected to be positive in the second half of 2023, as cash outflows from LSTK Projects will be significantly less

NCIB Program

• The Board of Directors has approved a normal course issuer bid ("NCIB") program for the next 12 months, which has been approved by the Toronto Stock Exchange

MONTREAL, March 3, 2023 /CNW/ - SNC-Lavalin Group Inc. (TSX: SNC), a fully integrated professional services and project management company with offices around the world, today announced its financial results for the fourth quarter and full year ended December 31, 2022.

"I am pleased with our SNCL Services fourth quarter results which further demonstrate our ability to deliver on our stated "Pivoting to Growth" strategy," said Ian L. Edwards, President and CEO of SNC-Lavalin Group Inc. "Our SNCL Services business produced its seventh consecutive quarter of positive year-over-year revenue growth, and our Engineering Services segment achieved a third consecutive quarter of record high backlog, with continued growth in the U.S. Looking forward, we expect 2023 will be another strong year for our resilient services businesses with revenue growth, margins and cash flows in line with our financial targets through to 2024."

"With the LSTK challenge now largely behind us, we now turn our focus on the next phase of our transformation into a pure play Professional Services and Project Management company. As such, we are conducting a strategic review to further optimize our portfolio of businesses in order to focus on the successful growth we achieved in 2022, within our Engineering Services, Nuclear and O&M businesses. Significant opportunity lies ahead for SNC-Lavalin as governments and public entities across the world make structural decisions for a greener power grid. Our end-to-end Engineering Services and Nuclear capabilities position us as market leaders to support these global initiatives," added Mr. Edwards.

Fourth Quarter Financial Results

Professional Services & Project Management are collectively referred to as "PS&PM" to distinguish them from "Capital" activities. PS&PM groups together five of the Company's segments, namely Engineering Services, Nuclear, Linxon, Operation & Maintenance ("O&M"), and Lump-Sum Turnkey ("LSTK") Projects, while Capital is its own reportable segment and separate from PS&PM.

IFRS Financial Highlights

Non-IFRS Financial Highlights

• Q4 2022 net loss from continuing operations attributable to SNC-Lavalin shareholders was $54.4 million, or $0.31 per diluted share, compared to a net loss of $15.3 million, or $0.09 per diluted share in Q4 2021.
• • The variation was mainly due to a lower Segment Adjusted EBIT, higher restructuring & transformation costs and net financial expenses, partially offset by lower corporate selling, general & administrative expenses. The increase in restructuring & transformation costs was mainly due to non-cash charges incurred to right size the office real estate footprint to align with new working practices, while the increase in net financial expenses was mainly due to the increase in interest rates experienced during the year.
• Management is undertaking a strategic review to optimize its portfolio of businesses, including Linxon, to ensure that capital and human resources are prioritized to the areas of the business with the highest value creation potential.

Lines of Business Performance

SNCL Services

• Q4 2022 revenue reached $1.7 billion, up 1.0% compared to Q4 2021, or 1.1% on an organic revenue growth⁽¹⁾⁽⁵⁾ basis, despite year-over-year comparison against results including a $93.0 million positive impact of a favorable arbitration outcome in Q4 2021 in Engineering Services.
• Q4 2022 Segment Adjusted EBIT was $155.9 million, representing a 9.0% margin.
• • Engineering Services Segment Adjusted EBIT of $119.2 million represents a strong 9.6% margin, but lower than the corresponding quarter last year, as Q4 2021 Segment Adjusted EBIT included a $93.0 million positive impact of a favorable arbitration outcome.
  • • Engineering Services Segment Adjusted EBITDA to segment net revenue ratio⁽¹⁾⁽⁶⁾ of 16.0%.
  • Nuclear Segment Adjusted EBIT of $40.6 million representing an 18.2% margin.
  • O&M Segment Adjusted EBIT of $10.2 million representing a 7.8% margin.
  • Linxon Segment Adjusted EBIT of $(14.2) million representing a (10.6)% margin.
  • • Linxon Segment Adjusted EBITDA to segment net revenue ratio⁽¹⁾⁽⁷⁾ of (15.2)%.
• Backlog amounted to $11.8 billion as at December 31, 2022, which included $1.9 billion of bookings in Q4 2022, representing a 1.10 booking-to-revenue ratio⁽¹⁾⁽³⁾.
• • Engineering Services backlog reached a third consecutive quarter record-high and totaled $4.7 billion as at December 31, 2022, an increase of 23.7%, compared to December 31, 2021, which includes another new record-high for the UK and the United States. Bookings in Q4 2022 totaled $1.3 billion, representing a 1.03 booking-to-revenue ratio⁽¹⁾⁽³⁾.

LSTK Projects

The Company continues to execute its LSTK projects exit strategy, progressing well on the winding down of its last remaining projects. Progress on all three infrastructure projects was strong in the quarter, and the two remaining Ontario projects are now largely physically complete.

• The LSTK Projects segment backlog slightly increased during the quarter, as the progress on the projects was mainly offset by higher forecast costs to complete the remaining projects. Backlog totaled $685.5 million as at December 31, 2022, representing a 41.3% decrease compared to December 31, 2021.
• Q4 2022 Segment Adjusted EBIT was negative $150.2 million, following what management expects is the last material cost reforecast, as the two Ontario projects are largely physically complete. This was driven primarily by previously identified factors of high construction and materials inflation rates, supply chain disruptions and labour actions.
• 2022 Segment Adjusted EBIT totaled negative $261.3 million and included:
• • $217 million of losses related with the previously disclosed $300 million* potential financial risks to complete the LSTK projects.
  • $44 million of losses mainly related to segment overhead costs needed to manage the completion of these projects and pursue the material cost reimbursement claims that management believes are entitled under the contracts.
• Losses related to the LSTK Projects segment in 2023 are forecasted to be primarily contained to overhead costs to successfully hand over the projects to the clients, and to pursue the Company's claims. These overheads costs are forecasted to be at a similar level to 2022.
• The Company is actively pursuing COVID-19 and other claims associated with the increased costs experienced on the projects. While discussions with the clients remain ongoing, and may take some time to settle, once the claims are resolved the related cash received will be incrementally positive to the Company's net cash from operating activities.

Capital

The Q4 2022 Capital Segment Adjusted EBIT decrease was mainly due to a decreased contribution from InPower BC G.P. (the John Hart Generating Station), since its disposal to SNC-Lavalin Infrastructure Partners LP in February 2022, as well as lower contribution from a concession driven by the shutdown of a power plant due to a planned major maintenance and the receipt of $37.2 million dividends from Highway 407 ETR, compared to $40.6 million in Q4 2021.

Operating Cash Flow and Financial Position

• Net cash generated from operating activities amounted to $176.0 million in Q4 2022. For the year ended December 31, 2022, net cash used for operating activities amounted to $245.4 million, better than the Company's latest outlook. The positive operating cash flows in Q4 2022 were mainly due to operating cash inflows from SNCL Services and Capital, partially offset by operating cash outflows needed to complete the remaining LSTK Projects.
• Net cash generated from operating activities in SNCL Services⁽¹⁾⁽⁸⁾ of $340.0 million in Q4 2022.
• Cash and cash equivalents of $570.3 million as at December 31, 2022.
• Recourse debt of $1.5 billion and limited recourse debt of $0.4 billion as at December 31, 2022.
• Net limited recourse and recourse debt to Adjusted EBITDA ratio⁽¹⁾⁽⁴⁾ of 2.9 as at December 31, 2022.

2023 Outlook

• This outlook is provided as at March 3, 2023, to assist analysts and investors in formulating their respective views on the year ending December 31, 2023. The following information is based on current expectations. This information is forward-looking and the actual results could differ materially. The 2023 Outlook section should be read in conjunction with the information on forward-looking statements at the end of this release.
• This outlook is based on the assumptions and methodology described in the Company's 2022 Annual MD&A under the heading, "How We Budget and Forecast Our Results" and the "Forward-Looking Statements" section below and is subject to the risks and uncertainties summarized therein and in the Company's 2022 Annual MD&A.
• Management expects for 2023 that SNCL Services organic revenue growth and profitability ratios should be within the ranges of its 2022-2024 targets, as outlined in the Company's "Pivoting to Growth" strategy presented during the September 2021 investor day.
• Management also expects that in 2023 net cash flows from operating activities should be negative in the first half of the year, as cash inflows from SNCL Services and Capital should be more than offset by cash outflows from LSTK Projects, while net cash flows from operating activities should be positive in the second half of the year, as cash outflows from LSTK Projects should be significantly less.
• SNC-Lavalin is providing the following targets for the full year 2023:

Normal Course Issuer Bid ("NCIB")

In light of, among other factors, the positive results from the Company's SNCL Services for the fourth quarter and year ended December 31, 2022 and the Company's 2023 Outlook as set out above and with a view to returning capital to shareholders, the Company's Board of Directors has approved a normal course issuer bid to repurchase up to 1.5 million common shares on the Toronto Stock Exchange (the "TSX") over the course of the next 12 months, which has been accepted by the TSX.

Quarterly Dividend

The Board of Directors today declared a cash dividend of $0.02 per share, unchanged from the previous quarter. The dividend is payable on March 31, 2023, to shareholders of record on March 17, 2023. This dividend is an "eligible dividend" for Canadian federal and provincial income tax purposes.

Fourth Quarter 2023 Conference Call / Webcast

SNC-Lavalin will hold a conference call and audio webcast today at 8:30 a.m. (Eastern Time) to discuss and present its fourth quarter financial results. The live audio webcast of the conference call can be accessed through a link posted on the Company's website, as well as an accompanying slide presentation, at www.investors.snclavalin.com. The call will also be accessible by telephone, please dial toll free at 1 800 319 4610 in North America or dial 1 604 638 5340 outside North America. You can also use the following numbers: 416 915 3239 in Toronto, 514 375 0364 in Montreal, or 0808 101 2791 in the United Kingdom. A recording and a transcript of the conference call will be available on the Company's website within 24 hours following the call.

About SNC-Lavalin

Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices around the world dedicated to engineering a better future for our planet and its people. We create sustainable solutions that connect people, technology and data to design, deliver and operate the most complex projects. We deploy global capabilities locally to our clients and deliver unique end-to-end services across the whole life cycle of an asset including consulting, advisory & environmental services, intelligent networks & cybersecurity, design & engineering, procurement, project & construction management, operations & maintenance, decommissioning and capital. – and delivered to clients in key strategic sectors such as Engineering Services, Nuclear, Operations & Maintenance and Capital. News and information are available at snclavalin.com or follow us on LinkedIn and Twitter.

Non-IFRS Financial Measures and Ratios, Supplementary Financial Measures and Non-Financial Information

The Company reports its financial results in accordance with IFRS. However, the following non–IFRS financial measures and ratios, supplementary financial measures and non-financial information are used by the Company in this press release: Organic revenue growth (contraction), EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to SNC-Lavalin shareholders, Adjusted diluted EPS, Booking-to-revenue ratio, Segment Adjusted EBITDA to segment net revenue ratio, Segment net revenue, Net limited recourse and recourse debt to adjusted EBITDA ratio, Net limited recourse and recourse debt and Net cash generated from (used for) operating activities on a line of business/segment basis. Additional details for these non-IFRS financial measures and ratios, supplementary financial measures and non-financial information can be found below and in Sections 8 and 13 of the Company's 2022 Annual MD&A, which sections are incorporated by reference into this press release, filed with the securities regulatory authorities in Canada, available on SEDAR at www.sedar.com and on the Company's website at www.snclavalin.com under the "Investors" section. Non-IFRS financial measures and ratios, supplementary financial measures and non-financial information do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with IFRS, these non-IFRS financial measures and ratios, and supplementary financial measures and non-financial information provide additional insight into the Company's operating performance and financial position and certain investors may use this information to evaluate the Company's performance from period to period. However, these non-IFRS financial measures and ratios, and supplementary financial measures and non-financial information have limitations and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Furthermore, certain non-IFRS financial measures, certain additional IFRS measures and ratios, and certain supplementary financial measures and other non-financial information are presented separately for PS&PM, by excluding components related to Capital, as the Company believes that such measures are useful as these PS&PM activities are usually analyzed separately by the Company. Reconciliations and calculations of non-IFRS measures to the most comparable IFRS measures are set forth below in the section "Reconciliations and Calculations" of this press release.

Reconciliations and Calculations

Reconciliation of Adjusted net income (loss) attributable to SNC-Lavalin shareholders from PS&PM to IFRS net income (loss) attributable to SNC-Lavalin shareholders from continuing operations

Reconciliation of EBITDA and Adjusted EBITDA to IFRS net income (loss) from continuing operations

Calculation of segment net revenue and Segment Adjusted EBITDA to segment net revenue ratio for Engineering Services and Linxon segments

Calculation of organic revenue growth (contraction)

Calculation of booking-to-revenue ratio

Calculation of net limited recourse and recourse debt to Adjusted EBITDA ratio

Forward-Looking Statements

Reference in this press release, and hereafter, to the "Company" or to "SNC-Lavalin" means, as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements or associates, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements or associates.

Statements made in this press release that describe the Company's or management's budgets, estimates, expectations, forecasts, objectives, predictions, projections of the future or strategies may be "forward-looking statements", which can be identified by the use of the conditional or forward-looking terminology such as "aims", "anticipates", "assumes", "believes", "cost savings", "estimates", "expects", "forecasts", "goal", "intends", "likely", "may", "objective", "outlook", "plans", "projects", "should", "synergies", "target", "vision", "will", or the negative thereof or other variations thereon. Forward-looking statements also include any other statements that do not refer to historical facts. Forward-looking statements also include statements relating to the following: i) future capital expenditures, revenues, expenses, earnings, economic performance, indebtedness, financial condition, losses, project- or contract-specific cost reforecasts and claims provisions, and future prospects; ii) business and management strategies and the expansion and growth of the Company's operations; and iii) the expected additional impacts of the ongoing COVID-19 pandemic on the business and its operating and reportable segments as well as elements of uncertainty related thereto. All such forward-looking statements are made pursuant to the "safe-harbour" provisions of applicable Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Company's current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company's business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Forward-looking statements made in this press release are based on a number of assumptions believed by the Company to be reasonable as at the date hereof. The assumptions are set out throughout the Company's 2022 Annual MD&A (particularly in the sections entitled "Critical Accounting Judgements and Key Sources of Estimation Uncertainty" and "How We Analyze and Report Our Results"). If these assumptions are inaccurate, the Company's actual results could differ materially from those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the Company's assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by these forward-looking statements. These risks include, but are not limited to, matters relating to: (a) epidemics, pandemics, including COVID-19, and other global health crises; (b) execution of the Company's "Pivoting to Growth Strategy" unveiled in September 2021; (c) fixed-price contracts or the Company's failure to meet contractual schedule, performance requirements or to execute projects efficiently; (d) backlog and contracts with termination for convenience provisions; (e) contract awards and timing; (f) being a provider of services to government agencies; (g) international operations; (h) nuclear liability; (i) ownership interests in investments; (j) dependence on third parties; (k) supply chain disruptions; (l) joint ventures and partnerships; (m) information systems and data and compliance with privacy legislation; (n) qualified personnel; (o) competition; (p) professional liability or liability for faulty services; (q) monetary damages and penalties in connection with professional and engineering reports and opinions; (r) gaps in insurance coverage; (s) health and safety; (t) work stoppages, union negotiations and other labour matters; (u) global climate change, extreme weather conditions and the impact of natural or other disasters; (v) divestitures and the sale of significant assets; (w) intellectual property; * liquidity and financial position; (y) indebtedness; (z) impact of operating results and level of indebtedness on financial situation; (aa) security under the CDPQ Loan Agreement (as defined in the Company's 2022 Annual MD&A); (bb) dependence on subsidiaries to help repay indebtedness; (cc) dividends; (dd) post-employment benefit obligations, including pension-related obligations; (ee) working capital requirements; (ff) collection from customers; (gg) impairment of goodwill and other assets; (hh) the impact on the Company of legal and regulatory proceedings, investigations and dispute settlements; (ii) further regulatory developments as well as employee, agent or partner misconduct or failure to comply with anti-corruption and other government laws and regulations; (jj) reputation of the Company; (kk) inherent limitations to the Company's control framework; (ll) environmental laws and regulations; (mm) global economic conditions; (nn) inflation; (oo) fluctuations in commodity prices; and (pp) income taxes.

The Company cautions that the foregoing list of factors is not exhaustive. For more information on risks and uncertainties, and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the sections "Risks and Uncertainties", "How We Analyze and Report Our Results" and "Critical Accounting Judgements and Key Sources of Estimation Uncertainty" in the Company's 2022 Annual MD&A filed with the securities regulatory authorities in Canada, available on SEDAR at www.sedar.com and on the Company's website at www.snclavalin.com under the "Investors" section.

The forward-looking statements herein reflect the Company's expectations as at the date of this press release and are subject to change after this date. The Company does not undertake to update publicly or to revise any written or oral forward-looking information or statements whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation. The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement.

The Company's audited consolidated financial statements for the year ended December 31, 2022, together with its 2022 Annual MD&A for the corresponding year, can be accessed on the Company's website at www.snclavalin.com and on www.sedar.com.

SOURCE SNC-Lavalin